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TMI Blog2019 (3) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... Note 6 of Chapter 85 of the Central Excise Tariff Act, 1985. In the present case, the software is preloaded in the CPU. Appellants do not manufacture software. The purchase order for the computer system is a composite one which is for supply of computer system preloaded with Windows XP (OS) and Antivirus software besides the service and installation at customer s site - From the evidence tendered by the above witness as well as from the invoices, it is seen that the software is preloaded. The Ld. Counsel for the appellants has made a frail effort to argue that these are only testing software. Undisputedly, for activation and use of the computer this software is essential. The software is thus an integral part of the computer systems, though shown separately in the invoices. The value of the software has to be included in the assessable value for payment of Excise Duty. Revenue neutral situation - Held that:- The appellant has to pay Central Excise Duty on the assessable value arrived for the computer sets after including the value of software. Any service tax to be paid under ITSS services for Royalty has no connection or bearing with the liability to discharge Excise Duty. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- under Rule 25(1)(a) of the Central Excise Rules, 2002. Hence, Appeal No. E/434/2011. 2.2.2 A Show Cause Notice dated 03.05.2011 was issued proposing demand of the aforesaid amount of ₹ 6,60,278/- for the period from April 2010 to September 2010 with interest thereon as also imposition of penalty. Another Show Cause Notice dated 01.11.2011 was also issued on the same dispute inter alia proposing demand of the excess duty of ₹ 8,53,642/- for the period from October 2010 to January 2011 with interest thereon as also imposition of penalty. Both these Show Cause Notices were adjudicated by the Original Authority vide common Order dated 01.03.2017 and the duty amounts proposed in the two Show Cause Notices totalling to ₹ 15,13,920/- with interest thereon were demanded. Equal penalty under Rule 25 of the Central Excise Rules, 2002 was also imposed. In appeal, vide impugned Order dated 09.11.2017, the Commissioner (Appeals) reduced the penalty under Rule 25 ibid to ₹ 1,50,000/-, but however upheld the remaining part of the Order passed by the Original Authority. Hence, Appeal No. E/40260/2018. 3. Today when the matter came up for hearing, on behalf of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation technology software and right to use software components for the creation of and inclusion in other information technology software products; f. Providing the right to use information technology software electronically. For the entire period involved in these appeals i.e., from May 2009 to January 2011, the appellant has paid service tax under the head, Information Technology Software Service . For the period May 2009 to March 2010 as against the confirmed demand of ₹ 19,12,633/- the appellant has paid ₹ 23,55,402/-. For the period April 2010 to January 2011 as against the confirmed demand of ₹ 15,13,920/- the appellant has paid ₹ 15,13,920/-; (iii) He relied on : Budget 2008-09 Changes and Clarifications on Service Tax M.F. (D.R.) Letter D.O.F. No. 334/1/2008 dated 29.02.2008; F. No. 354/189/2009-TRU dated 04.11.2009 Clarification of double taxation Customs and Service Tax; Circular No. 15/2011-Cus. dated 18.03.2011 F. No. 354/189/2009-TRU - Excise or Service Tax; Budget Changes 2016-17 (Service Tax) CBEC Clarifications D.O.F. No. 334/8/2016 TRU dated 29.02.2016 Excise or Service Tax. (iv) The B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to Microsoft for licence to use, which gets added to sale price; that M/s. PCS do not manufacture software; that reloading from evaluation copy supplied by Microsoft is merely a facility to the customer buying software. 4. On the other hand, on behalf of the Department, Ld. AR Ms. T. Usha Devi supports the impugned Order. She made oral submissions which can be broadly summarized as under : (i) Appellants had adopted different invoicing patterns in respect of software pre-loaded on to the CPU and cleared as computer systems with an intention to artificially show that software was removed or sold separately, even when the purchase order was composite for supply of the system with software pre-loaded. There was no separate supply order for software. In all cases, purchase order for the supply of computer system is composite for the supply of those computer systems pre-loaded with Windows XP (OS) and antivirus software and the service of installation at customers site; (ii) Pre-loading is very much an activity connected to the manufacture of computer systems. The impugned software is Operational Software (System Software), without which the computer cannot function; (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or separate assessment of preloaded software, was deleted and hence, the classification of software changed to Heading 8523 of the Central Excise Tariff Act, 1985 with effect from 01.01.2007. Thus, after 01.01.2007 software loaded on to the CPU has lost the eligibility for separate duty assessment and became assessable to duty as a part of the CPU and thereby part of the computer system. 8. The judgement of the Hon ble Apex Court in the case of Commissioner of Central Excise, Pondicherry Vs. M/s. Acer India Ltd. 2004 (172) E.L.T. 289 (S.C.) has been greatly relied upon by the appellants. However, it is pertinent to take note that the facts of the said case relates to a period prior to the deletion of Chapter Note 6 of Chapter 85 of the Central Excise Tariff Act, 1985. This is evident from paragraph 64 of the judgement in M/s. Acer India Ltd. (supra), wherein the Hon ble Apex Court has taken note of Chapter Note 6 which then existed, which is reproduced as under : 64. The softwares, thus, whether they are cleared with the apparatus for which they are intended, viz., with the computer or not they remain classified under the same heading. By reason of the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e neutral situation. It is the case of the appellant that ITSS became taxable services with effect from 16.05.2008. For the period from May 2009 to March 2010, the appellants paid service tax of ₹ 23,55,402/- as against the confirmed Excise Duty of ₹ 19,12,633/-. For the period from April 2010 to January 2011, they paid service tax of ₹ 15,13,920/- as against confirmed duty of ₹ 15,13,920/-. The appellant then relied upon Circular No. 334/1/2008 dated 29.02.2008 to argue that the said Circular clarified that the service tax paid under ITSS shall be available as Input Credit under the CENVAT Credit scheme. Paragraph 4.1 of the Circular speaks about ITSS. The appellant has relied upon Sub-Clause (v) of Section 65(105)(zzzze) which defines taxable service to argue that distribution and sale of information technology software is an activity attracting levy of service tax under the category of ITSS. That the appellant has discharged service tax for sale of software, being a service falling under ITSS. In paragraph 4.1.4 of the very same Circular, it is stated that Input Credit would be available on the service tax paid on ITSS. Further relying upon Circular No. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 23,55,402/-. Again, for the period from April 2010 to January 2011 as against confirmed Excise Duty demand of ₹ 15,13,920/-, the appellant has paid service tax of ₹ 15,13,920/-. 10.3.4 The President of Operation Shri. Dinesh Baboo Maheshwari, in his statement dated 23.02.2007, has stated that the difference between purchase price of software and sale price to customers is because the appellant adds the Royalty to the sale price. In paragraph 8 of the Show Cause Notice dated 14.05.2010 it is noted that during the period from 03/2006 to 07/2008, the appellants were clearing the software under Central Excise invoices. During the period from 08/2008 to 09/2008, they were clearing under both Central Excise and Service Tax invoices. From the period from 10/2008 to 03/2010, they were clearing only on Service Tax invoices. 10.4 The appellant has to pay Central Excise Duty on the assessable value arrived for the computer sets after including the value of software. Any service tax to be paid under ITSS services for Royalty has no connection or bearing with the liability to discharge Excise Duty. Therefore, the prayer of the appellant that they have paid service tax a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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